Blog Zoning

Smaller Lots, Smaller Prices: Evidence from Houston

February 07, 2024

In recent years, pro-housing reformers around the country have successfully changed state and local land use policies to allow greater density on residential lots zoned exclusively for one house. Most of these efforts have focused on adjusting regulations such as zoning codes and public review processes to legalize multifamily housing – i.e., more than one house per residential lot, such as fourplexes and apartments – on parcels of land that are large enough to accommodate them, but zoned to prohibit their construction.

Houston, Texas has taken a different path. Instead of rezoning for so-called “missing middle” multifamily housing, Houston reduced its minimum lot size from 5,000 square feet to 1,400 square feet. These reforms made it possible to build smaller, less-expensive homes on less land. Some zoning reform critics argue that allowing more density will not bring down housing prices because any increase in allowable density will raise the price of land. In a recent paper, Emily Hamilton tests this hypothesis. The Effects of Minimum Lot Size Reform on Houston Land Values uses data from Houston’s 2013 expansion of minimum lot size reform and finds no evidence for land value lift.

Key Takeaways

  • Minimum lot size reform had no measurable effect on land values.
  • The lot size reform has facilitated a large amount of housing construction.
  • The subsequent increase in housing supply put downward pressure on rents.

Houston’s reforms were rolled out in two phases. Local policymakers cut minimum lot size requirements within the city center in 1998, then expanded the area in 2013 to cover all the land in the city with wastewater collection infrastructure.

Houston famously does not have traditional zoning. Its robust housing construction has kept housing prices below the national median, helping it achieve the title of most-affordable sun-belt city.

Before 1998, Houston required a 2,500 square foot lot for townhouses or a 5,000 square foot lot for single family homes. The 1998 reforms reduced the townhouse lot size requirement to allow for parcels small as 1,400 square feet, subject to conditions around waste and stormwater, as well as lot coverage and permeable area, within the I-610 Loop. Then in 2013, the city extended these reforms citywide. Notably, the city also allowed neighborhoods to opt out of minimum lot size reforms, a move that may have helped their political feasibility.

Hamilton uses county assessor data and GIS to examine changes in land prices within 2 miles of the I-610 loop. Using a difference-in-difference study design, she finds “no evidence that the reform increased assessed land values,” and finds that the lot size reforms may have reduced land values in the areas most likely to see small-lot development.

Hamilton concludes by noting that while the lot size reforms may have increased the option value of the land, the enormous geographic area they covered increased the “zoning buffer” to such an extent that land prices remained stable. This is in contrast to previous studies, which examined small-area upzonings near transit stops.